Sample Exam

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[triplea]

Sweet.

[triplea]

[Almighty Malachi]

[Almighty Malachi]

[stockzzzzz]

Originally Posted by triplea

Sweet.

hey, AAA, where is yours?

[triplea]

Originally Posted by stockzzzzz

hey, AAA, where is yours?

I am committing to post mine May 3rd. Last sitting I released it 9 days before the exam, so I'll do something similar...

[chiefrc77]

First off, thank you for putting this together, it is nice to have a practice exam to do instead of the same old reading and working problems.

I did notice two problems with the answers:

Problem 13 says that Class 2 is capped whereas I didn't get that answer. I have that it is 404 before the cap and raised to 413 or so after the cap which is a 14.7% increase for Class 2.

Problem 15 says the coinsurance requirement is 350K whereas it is 375K. Then the coinsurance penalty was not properly subtracted as it gives an answer of 232,149. I got 83,333.33 as the coins. penalty.

[stockzzzzz]

Great questions!!!

Question #5, for Policy year 2005, incurred loss, policy#3, you have 30,000. I think it should be 20,000.

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Originally Posted by chiefrc77

First off, thank you for putting this together, it is nice to have a practice exam to do instead of the same old reading and working problems.

I did notice two problems with the answers:

Problem 13 says that Class 2 is capped whereas I didn't get that answer. I have that it is 404 before the cap and raised to 413 or so after the cap which is a 14.7% increase for Class 2.

Problem 15 says the coinsurance requirement is 350K whereas it is 375K. Then the coinsurance penalty was not properly subtracted as it gives an answer of 232,149. I got 83,333.33 as the coins. penalty.

Hi, thank you for giving me feedback. Problem 15 is a typo you are right. The correct answer is what you specified.

However I am standing by my answers to problem 13. Calculating the percentage change from the revised rates in (b) you get the following % change -
Class 1 - 23.1%, class 2 - 12.2%, and class 3 - 3.23%. So class 1 needs to be capped at 15%. So the capped base rate is 300*1.15 = 345. Skipping some steps, the amount of premium that are capped in class 1 is 26,001. Now you need to calculate the percent increase you need to take on class 2 and class 3 revised rates to get rate neutral.

So 26,001/[(404+433.56)*1000] = 3.1% means you have to increase 404 and 433.56 by 3.1%. But 404*1.031 = 416.5 is 15.7% larger than class 2 current rate. Therefore, you need to cap that at 15%. Then, you just iterate and figure out how much to recover from class 3.